Livestock Analysis (VIP) -- December 13, 2013

Price action: Lean hog futures closed slightly to moderately lower for the day and sharply lower on the week.

5-day outlook: Hog numbers continue to build and wholesale pork prices are weakening, which will keep pressure on cash prices. However, packers are cutting in the black, which will temper losses in the cash market as packers will want to keep kill lines filled.

30-day outlook: The seasonal peak in hog numbers and weights is near. Traders note the average weight in the important Iowa and southern Minnesota market reportedly slipped last week, which may be an early indicator that weights will begin tracking lower. The wholesale market will remain under pressure until after the holiday season is past. Retailers may start featuring pork after the start of the year as wholesale beef prices are near record highs.

90-day outlook: Traders look for supplies to edge lower in the first few months of 2014 as both average weights and numbers ease downward seasonally. Wholesale pork demand may see some uplift as pork prices will compare very favorably with retail beef prices.

Feed needs: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.

Cattle

Price action: Live cattle futures were weaker today, but for the week nearby futures were steady to firmer compared to last week's close and deferred futures posted moderate weekly gains.

5-day outlook: Cash cattle trade was trickling in across the Plains and Midwest this morning at $131, which is down a dollar from last week. December live cattle are trading at less than a dollar premium to the cash market and traders are comfortable with some premium in the market due to harsh feedlot conditions and tightening supplies.

30-day outlook: Boxed beef prices continue in their gradual seasonal uptrend and beef movement improved this week to signal retailers are successfully passing on higher beef prices to consumers. But that may not last after holiday features have run their course and consumers begin getting their holiday credit card statements. This week's slight drop in the cash market has traders talking about a near-term high being in place.

90-day outlook: Downside risk for live cattle futures will be limited to periods of profit-taking as supplies are expected to be tighter in 2014. While export demand is expected to decline slightly next year due to tighter supplies, the cattle market should still post its 10-year cycle high sometime in 2014 as producers begin to more actively keep heifers out of the slaughter mix.

Hedgers: Fed cattle producers should carry all risk in the cash market for now. Feeder cattle sellers and buyers should also carry all risk in the cash market for now, but feeder cattle buyers should stay in touch to establish long coverage.

Feed needs: 25% of 1st-qtr. protein needs are covered in long March meal futures at $410.80.